Crude oil prices have plunged 38 percent over that same period, and oil is down over 60 percent from its peak above $100 a barrel last summer.

The euro has dropped 15 percent in value against the dollar over the same period, and as my colleague Mike Larson pointed out yesterday in Money and Markets, the Swiss franc just surged 15 percent — in a single day!

Extreme moves like this are certainly not the norm; it’s a sign of rising stress levels in financial markets worldwide.

Extreme moves like we’re seeing now are a sign of rising stress in the financial markets.

A Bloomberg story this morning hints at the potential fallout to come as a result of the Swiss franc swan dive.

FXCM Inc. (FXCM), the largest retail foreign-exchange dealer in the U.S., said it could be on the hook for $225 million in client losses as a result of the sudden, adverse currency moves, and the firm may require a bailout.

FXCM may not be alone. In the past month, financial markets appear to be moving back into risk-off mode once again, if only temporarily.

And the choppy market conditions we’ve seen in recent weeks stand in stark contrast to the serene but steady advance in both stocks and bonds during 2013 and 2014.

With the New Year not even 3 weeks old, the S&P 500 Index is already down 3 percent (before today’s nice gain) in what has historically been a strong month for stock returns. In fact, stocks sailed through 2014 without a single losing streak of four down days in a row. But already in January we’ve experienced two streaks of five straight down days!

What’s going on here and why have markets suddenly turned volatile?

Well, there is a long list of worries, which is always the case, and many of these are well documented already. But what it really comes down to is the ongoing tug-of-war between the forces of inflation and deflation. This battle has been raging since the financial crisis in 2008.

Some economies, most notably the U.S., have recovered nicely and are growing at a solid pace again.

“In a risk-off market, it’s not a bad idea to selectively take some profits, and raise cash.”

Others, including most of the European continent and Japan have never fully recovered; and are now backsliding into a state of recurring recession.

Emerging market nations are somewhere in between, with Asia performing well, while Latin American economies struggle through this climate of uneven growth.

The bottom line is there are a number of tricky cross-currents impacting markets early in 2015, and there is a great deal of noise for investors to contend with.

Stay on your toes, and be prepared for more volatile market moves in the weeks ahead. In a risk-off market, it’s not a bad idea to selectively take some profits, and raise cash, because choppy markets have a wonderful way of producing unexpected buying opportunities to put that dry powder back to work again.

Our Readers Respond

Mike Larson is out today, but he is looking at your comments and will respond when his regular column returns Tuesday after the holiday.

Other Developments of the Day

Driven down by lower energy prices, U.S. consumer prices posted their largest decline in six years in December — falling 0.4 percent, the most since December 2008. Analysts said it will increase chances that the Federal Reserve will hold off raising interest rates until late this year. The core CPI, which eliminates food and energy, was unchanged in December — just the second time since 2010 that it didn’t increase.

Goldman Sachs (GS), the last of the big banks to report for the week, posted slightly better-than-forecast fourth-quarter results, boosted by cost-cutting measures as revenue was weaker. Goldman reported earnings per share of $4.38 on revenue of $7.7 billion. That was a touch above Wall Street forecasts of $4.36 and $7.66 billion. “We are pleased with our performance during a year characterized by mixed global economic and financial conditions,” CEO Lloyd Blankfein said. “The depth of our global client franchise and our continued discipline on expenses and capital management produced a solid return for our shareholders. Looking ahead, we see evidence of a continued pick up in momentum for the global economy that will improve the opportunity set for 2015.”

Oil prices got a lift in the morning after the International Energy Agency (IEA) forecast the current selloff would end, although analysts quoted by Reuters said a strong rebound soon was unlikely as output continued to outweigh demand. The IEA agreed with analysts, saying the market could fall further before a recovery. But it added that there were already signs lower prices were beginning to reduce production in some areas, including North America.

New York Gov. Andrew Cuomo wants to put some of the windfall received by the state from recent settlements with financial institutions to work. He is proposing a $1.5 billion contest in which seven upstate N.Y. regions will compete against each other to come up with the best proposals for the money to spur economic development. The three winning regions will get $500 million each. “I believe in competition,” Cuomo said. “If I just gave you the money, you wouldn’t do all the hard things you have to do to get the money. The competition amongst yourselves brings up the performance of everybody.”

A five-member panel will review the regions’ strategic plan submissions in the upstate revitalization competition. The seven eligible regions are the Finger Lakes, the Southern Tier, central New York, the Mohawk Valley, the Capitol Region, the mid-Hudson valley and the North Country.

Too much weed? The Associated Press reports that Washington State legal marijuana growers are suffering through a glut of the product, as a flood of producers surfaced after pot was legalized last summer. An especially big harvest has forced down prices, creating an “economic nightmare,” according to an executive at Dutch Brothers Farms in Seattle. The AP says there are about 270 licensed growers in the state, but there are only about 85 shops open to which they can sell their product. The Dutch Brothers exec says he sold his first crop of 22 pounds for just under $21 a gram. He’s about to harvest his second crop, but this time he expects to get just $4 a gram.

Meanwhile, the collapse in oil prices is great for drivers at the gasoline pumps, but there are negatives, of course. One of those relates to jobs, and Schlumberger Ltd. (SLB) confirmed that fact: The oilfield services giant said it plans to slash 9,000 jobs — nearly 8 percent of its 120,000 workforce. “In this uncertain environment, we continue to focus on what we can control,” CEO Paal Kibsgaard said. “We have already taken a number of actions to restructure and resize our organization that have led us to record a number of charges in the fourth quarter. We are convinced that performance must now be driven by an accelerated change in the way we work through our transformation program.”

Remember, you can comment on these or any other matters by clicking here. We at Money and Markets are interested in knowing if any of you have directly felt the negative effects of lower oil prices. Click here to comment.

Good investing,

Mike Burnick

Mike Burnick, who has over 25 years of professional investment experience, is the Director of Research at Weiss and editor of Options Power Trader. Mike has been a Registered Investment Adviser and portfolio manager responsible for the day-to-day operations of a mutual fund. He also served as Director of Research for Weiss Capital Management, where he assisted with trading and asset-allocation responsibilities for a $5 million ETF portfolio.

{23 comments }

Roland WilhelmyFriday, January 16, 2015 at 5:23 pm

“and as my colleague Mike Larson pointed out yesterday in Money and Markets, the Swiss franc just collapsed 15 percent — in a single day! ”
Wrong! The franc rose; it was the euro that fell, and that is what Mike Larson said it did. Currencies are confusing because some are quoted as how much in dollars they cost and others are quoted in how many (or how much) one dollar will buy.

Mark NajarianFriday, January 16, 2015 at 5:35 pm

Of course you’re right — that was an editing error and has been fixed.

Phil WFriday, January 16, 2015 at 6:26 pm

Well there’s still a reference to the “Bloomberg story about the Swiss Franc swan dive…” So some more editing please!

Donald LinkFriday, January 16, 2015 at 5:30 pm

The Swiss debacle should remind (but won’t) governments and investors of the dangers of trying to artificially manipulate markets and money. Lesson learned, until the next time.

MikeFriday, January 16, 2015 at 5:45 pm

This will happen again I agree . Caused by central banks if you lost money on the Swiss situation this is where you should look. Besides yourself believing the currency markets are not rigged .

GordonFriday, January 16, 2015 at 5:57 pm

Could you please repunctuate so that we can make some sense out of your writing ?

BruceFriday, January 16, 2015 at 6:06 pm

Mike, you do the best job of the entire ‘cast of characters’ at Weiss. You are a breath of fresh air among the . . . at Weiss!

BFDFriday, January 16, 2015 at 6:09 pm

Mike – You provide the best comments from among the . . . at Weiss! Thank you, you’re the best!

BernieFriday, January 16, 2015 at 6:29 pm

Mike Burnick unfortunately has it backwards. The Swiss Franc did not dive 15%, it appreciated by 15%! Great analysis, indeed.

Everyone keeps referring to the SNB decision as a black swain event, they are wrong. The black swain happened a few yrs back when they decided to peg the franc to the euro. It has just played out now that the SNB came back to their senses. How long will the public keep putting up with the central banks and their disaterous policies? Just wait till fed tries to unwind their mess. They are clueless how to unwind the QE addiction. My guess, more drugs will be coming. Lord have mercy on is all.

Peter WFriday, January 16, 2015 at 9:11 pm

I understand that psychology plays an important part of how the market moves. It seems to take significant negative perceptions on the part of market players before the tide turns. It appears that the US economy is strong and should continue to do well. However, the decrease in gas prices seems to be due to decreased world demand and over supply. A decrease in price in theory should be increasing demand but that does not seem to be happening. Transportation costs should decrease as fuel prices drop, but have transport prices dropped yet. It seems that as these prices drop we should see greater demand for those services. It appears to me that the increase in the demand component is not there. The drop in fuel cost should act as a tax decrease but where is the increase in consumer spending? The drought in California seems to be ignored by the rest of the country. i have relatives in the central valley in agriculture. They say that it will take 5+ years of above average rainfall to replenish the water table. Another year of drought will cause a disaster to the economy of California and the cost of scarce agricultural products will skyrocket. As California goes, so goes the nation. The real estate market in the Southwest is finally experiencing a recovery of housing prices. Those people who have not sold their houses before are thought to be ready to list. That will flood the market and the housing market may collapse because the demand is not there. The stock market may be in good shape now, but the psychology of today’s consumers has become more cautious. Volatility in the stock market scares individuals who depend on safety and stable growth of their retirement funds. It reminds them of previous downturns lasting many years. Common people who have relied on interest income in the past to fund their retirement lifestyle are forced into a turbulent and seemingly dangerous stock market. Where are increased wages and salaries aside for those in top management? Where is job security for most of the consumers who drive the economy? I’ve got news for the analysts. The top 1% do not drive the consumer economy. So, what is your take on my supposed facts?

shahFriday, January 16, 2015 at 9:15 pm

two comments on the above story:
1. Goldman sachs earnings -GS is not a investment bank it is primarily a trading comapny as 80% of their income is form Trading/proprietory trading.
2. Effect of Oil prices. in my fcked up country India..consumers are not getting benefitted by fall in crude prices. our Oil refiners say they suffer inventory losses so they have so far only reduced gas(petrol) prices so far, in the last 6 months , by just 15% despite the fact crude has dropped by more than 60% in the last six months. however the corrupt government has raised duties on crude imports by more than 300% thus preventing beniefts to consumers.

carol lawsonFriday, January 16, 2015 at 9:30 pm

I would like an opinion on holding stock certificates as I was told that today that is not a
good idea.
Thanks,
Carol

HowardFriday, January 16, 2015 at 11:20 pm

Hi Mike

In two weeks I have lost $300,000 on one stock alone, although I’m not ready to jump out of the window just yet. The multiples are great but expensive where a 1 cent move means a $5,800 change in value. However this market has made me consider risk more closely. Not so much on stock volumes, but more on stock categories. It sure keeps you up all hours though.

HowardMonday, January 19, 2015 at 6:11 am

Ah yes I feel like the chap up above, but someone told me long ago to buy at the bottom and sell at the top

HowardSaturday, January 17, 2015 at 12:05 am

Hi

Would someone please tell Mike Larson that America is not going to die

MikeSaturday, January 17, 2015 at 4:24 am

Burnick – Oh boy!!! Have you ever got it wrong!!!! The Swiss Franc SOARED. It didn’t do a swan dive at all. How much faith are we supposed to have in your financial savvy if you make incredible blunders like that???

BLKBRD37Saturday, January 17, 2015 at 4:56 pm

Agree! Those guys at Weiss seem to be playing a game. One of them says the market may be volatile, the other says the DOW will go to 31,000. When the dust settles they will then say they got it right. They claim they saw the crash coming in 2008 but that’s an exaggeration. Not one economist foresaw that. And they want you to continue to pay exorbitant fees for information that can be found elsewhere for free. They never say what their percentage of losses are – most likely higher than their gains. So far, Larry Edelson has got nothing right!

PaulSaturday, January 17, 2015 at 5:12 am

I’m afraid that error can have another implication:
The 15% revaluation of the CHF against the EUR is also a gain of 15% against the US$ – so to speak reversing the EUR/CHF peg of 2011. At the time, just prior to the peg, the Swiss Franc was actually the strongest it had been in 10 years against the US$. It’s therefore a “straw in the wind” hinting at the potential weakness of the US$.

Estelle KochSaturday, January 17, 2015 at 7:48 am

Hello,
I am Swiss and live in Switzerland and the Swiss Franc did not collapse 15% as you said, but it rose 15%. Now I can buy morre Dollars and morre Euro with the same amount than yesterday. So the Swiss franc rose, and the Stock market crashed 15 % in total over 2 days. So I lost also a bit n Swiss shares but will add up in the dip…
Do You know any ETF to buy to protect me from these curency changes?, I wish I had bought one a few days ago…
Best greetings, Estelle Koch

joseph yasinskiSaturday, January 17, 2015 at 7:17 pm

how can you send out your Real Wealth Report when you claim gold will have resistance at 1236 than 1247 and major resistance at 1256 when it is already 24 dollars over 1256.You should be ashamed of yourself.Larry Edelson find a different profession so you stop hurting investors that once believed in you.

GarySaturday, January 17, 2015 at 8:38 pm

I see oil prices remaining low for the next 8-12 months. Pres Obama once said that we can’t drill our way to lower gas prices. This appears to be untrue. Basic supply/demand from Econ 101 says otherwise. Fracking has a substantial upfront cost, and low ongoing cost. A typical well of this type last about two years. All existing wells will continue to produce, but new wells won’t come online. As they deplete themselves, oil prices should slowly rise. As OPEC still controls the big supply, they should desire to keep oil at $70-$80 a barrel, thus removing most new fracking wells in the near term. Look forward to $3.00 gas for the medium term, and enjoy the cheap gas today.